eXXon posted:

Remember, we're only in a technical recession. It is important to distinguish this from a non-technical recession because

tagesschau posted:

The loonie has dropped close to a third of a cent just this morning.

quote:

http://www.cbc.ca/news/business/carrying-a-lot-of-debt-don-t-worry-about-it-say-a-lot-of-marketers-1.3149408?cmp=rss

Carrying a lot of debt? Don't worry about it, say a lot of marketers

quote:

http://www.thestar.com/business/2015/07/15/house-prices-rise-despite-sales-slowdown-says-crea.html

House prices rise despite sales slowdown, says CREA

jm20 posted:

Why are there so many self serving articles of so called 'journalism' exactly?

Reverse Centaur posted:

Of course it has, I'm going to San Francisco for vacation this week

quote:

Collectively, the men stole millions from former NHL players, including Berard, Juneau, Michael Peca, Darryl Sydor, Bill Ranford and Sergei Gonchar, along with multiple Long Island businessmen and retired police officers.

Melian Dialogue posted:

Can someone make a good housing industry effort post to explain (in their eyes) what macro tools the government has used to get us to where we are now with housing prices and the bubble? I only know alittle bit about this topic so I'd like to be more educated into the details rather than just "people are dumb who buy lots too much". Someone mentioned earlier in the thread about CMHC's role in this as well.

Also, are we hosed no matter what we do? It seems like with even a slight interest rate increase, unsustainable debt will be even worse. Especially considering we're in a recession, which means future economic stimulation and consumer stimulation, so how do you get that Keynesian money-dump without also yet another increase in unsustainable debt?

quote:

Four changes CMHC needs to make to rein in its mortgage market influence

My nomination for the understatement of the year goes to Finance Minister Jim Flaherty, who in early December observed that “regrettably, CMHC became something rather more grand I think than it was intended to be.”

Indeed. The Crown corporation, which originally had a humble mandate of helping first-time buyers obtain favourable financing, now insures $560-billion of some of Canada’s riskiest mortgages, more than double what it insured in 2005.

To their credit, the current government has implemented several measures since 2010 aimed at reducing taxpayer exposure to the Canadian mortgage market, but some structural issues remain. Below are four changes that the government should consider making in 2014.

1) Increase income documentation requirements on insured mortgages

Canadians are rightfully proud of the stricter mortgage underwriting that spared us from some of the particularly egregious lending practices seen stateside before their real estate bust.

However, most Canadians would be surprised to learn that “prime” Canadian mortgages, particularly high-ratio mortgages insured by Canada Mortgage and Housing Corp., involve far less documentation than comparably-labelled “prime” loans in the U.S. … and this was true even during the subprime years.

Today, a borrower can obtain a prime, CMHC-insured mortgage with as little as a pay stub and a job letter, which would make it a low-documentation Alt-A mortgage by U.S. standards. RBC recently tweeted about this, noting that securing a mortgage in the U.S. requires more documentation than in Canada.

Interestingly, CMHC places the integrity of the underwriting primarily with the lenders themselves who profit from the mortgages, as the insurer seldom sees the physical documentation and very rarely spot checks mortgage applications at origination.

This relatively low standard for mortgage documentation coupled with a very obvious moral hazard leaves the door open for what the mortgage industry calls “soft fraud” or “fraud for shelter,” which typically involves the applicant (often with the knowledge of the lender) misrepresenting their financial circumstances, usually related to their income or job status.

There’s really nothing “soft” about this form of fraud, particularly when it’s a CMHC-insured mortgage where taxpayers are holding the bag. And while it’s impossible to know the true extent of the problem, one highly respected Canadian mortgage website suggested that it is “one of the most widespread and under-reported problems in mortgage lending” and that it is “surprisingly common these days.”

Regardless of the scope of the problem, the solution is relatively simple: CMHC should demand Canada Revenue Agency notice of assessments (NOAs) for all mortgage applications. This is common practice for prime mortgages in the U.S. and is a simple way to ensure that income or employment has not been significantly misrepresented given that NOAs are very difficult to alter or forge.

Interestingly enough, many lenders insist on seeing NOAs for conventional mortgages that aren’t being insured. This suggests, not surprisingly, that their underwriting is more stringent when they are forced to bear the risk for the mortgage they originate rather than insuring the mortgage through CMHC and passing the risk on to taxpayers.

2) Reinstate the regional mortgage cap

Prior to 2003, CMHC had a regional mortgage cap that set a maximum dollar amount on the size of mortgage they would insure. This made a lot of sense given that CMHC’s original mandate was geared toward helping first-time buyers get into entry-level housing. The logic here is simple: If a buyer can afford a home that is priced significantly above the local average, they shouldn’t need what effectively amounts to a taxpayer-backed subsidy to do so.

In what can only be described as a massive policy blunder, this cap was eliminated in 2003. For nearly a decade, CMHC would insure mortgages of any size, from simple starter homes to opulent mansions, a truly epic case of “mandate creep.” In 2012, a nationwide limit was re-established; CMHC will no longer insure mortgages on homes that are purchased for more than $1,000,000.

This is a step in the right direction, but it ignores the fact that a million-dollar home is well above a starter home in nearly all parts of Canada. This should change. One possible solution would be to set the maximum mortgage cap to the average resale price in each census metropolitan area and have that cap change annually to reflect changing house prices.

3) Eliminate the second home program

CMHC currently has a program that allows buyers to purchase a second home with as little as 5 per cent down. This program is most commonly used for purchasing recreational properties such as cottages, but can also be used to purchase a “pied-à-terre” for those who have to often travel to another city for work, or to purchase a home for children while they are attending college or university.

In the context of CMHC’s original mandate, this program is simply indefensible. If someone is fortunate enough to have the income and assets to purchase a second home, for recreational purposes or otherwise, they should not require taxpayers to bear the risk, particularly considering that the majority of Canadians are not fortunate enough to own multiple properties themselves. This program needs to go.

As an aside, contacts in the mortgage industry suggest that some investors are also currently abusing this program. In 2010, the government wisely changed the rules so that investors must put down 20 per cent on investment properties. However, the door has been left open to purchase investment properties with 5 per cent down through the Second Home Program, with taxpayers bearing the risk. Of course, the applicant can’t state up front that the home will be rented out, but they are free to quietly rent out their second home after the deal closes.

4) Increase transparency and oversight

The ironic part about Mr. Flaherty’s comments that CMHC has become something more “grand” than it was intended to be is that Canadians still have no idea just how “grand” CMHC has actually become since we still don’t know exactly what is included in that $560-billion in insurance in force.

This was driven home to me last year when a developer told me that CMHC recently had a program (and perhaps still does) that allowed developers to get insurance on loans for their condo developments. This is unbelievably bad policy. This effectively lowers the interest rate the developer would pay, but you can be assured that those cost savings would not be passed on to consumers at the other end. In essence, taxpayers were assuming risk on these development loans to pad developer pockets.

Dr. Ian Lee from Carleton University’s Sprott School of Business has in the past been an outspoken critic of CMHC’s lack of transparency. He recently told me via e-mail that “CMHC is the least transparent of all Canadian Crown corporations concerning its numerous activities and detailed breakdown of its insurance guarantees.”

This needs to change. Canadians have a right to know exactly what is in CMHC’s insurance portfolio considering that all taxpayers are collectively on the hook if these insured loans were to sour.

As we enter 2014 with Canadian households having higher debt loads than ever and house prices in most Canadian metropolitan areas at all-time highs relative to local incomes, Canadians should increasingly be asking if CMHC, in its current form, is serving and protecting their best interests.

Melian Dialogue posted:

Can someone make a good housing industry effort post to explain (in their eyes) what macro tools the government has used to get us to where we are now with housing prices and the bubble? I only know alittle bit about this topic so I'd like to be more educated into the details rather than just "people are dumb who buy lots too much". Someone mentioned earlier in the thread about CMHC's role in this as well.

blah_blah posted:

If you spend $1000 there you're really going to feel that extra $3 I guess.

jet sanchEz posted:

Wow, the dollar fell more than a whole cent today to 77.43. It's going to be at 72 cents by Christmas.

Baronjutter posted:

If any of us knew the answer to these currency what if questions we'd be fabulously wealthy.

Baronjutter posted:

-Government has the tax system set up to favour owning vs renting. You can deduct your mortgage but not your rent. There's also thousands of little tax breaks, grants, and subsidies that go towards making owning a home more attractive/easier as this was seen as a universal social good to elevate the population from being renting peasants and joining the middle class in pride of ownership.

Brannock posted:

blah_blah posted:

You can't deduct your mortgage except through the 'Smith Manoeuvre', which is fairly high-risk and something only a tiny fraction of Canadians do. This is different in Canada than the USA.

There also really aren't that many tax breaks or incentives for owning. There's the property transfer tax exemption for first-time homebuyers in BC, the first-time home buyers' tax credit (which reduces your income taxes by at most $750), the home owner's plan which lets you borrow from your RRSP without penalty, and the home owner's grant which reduces property taxes for if you own your primary residence. Even if you take advantage of all of these, owning is pretty unattractive given the massive differences between carrying costs on owning and rental rates in Vancouver currently.

ocrumsprug posted:

There aren't that many tax breaks.
Lists a paragraph of tax breaks.

You also missed the big one of capital gains exemption on your primary residence (ie. all you homes if you pretend you live in them.)

quote:

Mortgage broker Calum Ross thinks Canadian consumers are being short changed.

This morning, the Bank of Canada slashed its prime lending rate to 0.5 percent. That puts the cost of borrowing at an historic low. But it looks like the big banks are only going to pass on a fraction of today's savings to frontline consumers.

Ross says highly-profitable banks have no real justification for pocketing the difference between today's Bank of Canada cut and their own lending rates.

"It's tough to argue that it's anything but [a money grab]," Ross tells As It Happens guest host Laura Lynch. "This does go directly to their profit margin. Being completely fair, the banks in Canada are not short of profit."

Before the 2008 financial crisis, the banks usually matched cuts in interest rates by the Bank of Canada. Since then, it's been less predictable.

When the Bank of Canada last cut interest rates in January, it was by 0.25 percent. The banks followed by cutting only 15 basis points. This time there are rumours that the banks will only drop their rates by 10 basis points. Today, TD announced they're doing just that.

"There are some people who are saying they are building future loss provisions because, obviously, there is a lot of consumer debt in the economy," Ross says.

He doesn't buy that argument.

"There has not been an increase in defaults in Canada, so, while there is a lot of consumer debt that's in the market place, Canadian consumers are wealthier now than they ever have been," Ross says. "And with rising real estate values, the big banks have a lot of collateral."

He says that the rate cuts that banks have not passed on to consumers are beginning to add up.

"It's significant math. In the last few years, they've built in . . . more than one percent and so for a $400,000 mortgage, you're talking about $4,000 a year."

He wonders why there isn't more push-back.

"When our big banks in Canada are making more than 30 percent domestic return on capital and they've got an awful lot of margin built into variable rate mortgage loans, one has to ask, 'Why the government is not intervening?'"

He understands that consumers are happy that money is still relatively cheap, but he thinks they should be angry at the banks.

"I'm absolutely shell shocked that we have not had more public outcry and, quite frankly, more federal intervention from the regulators."

OSI bean dip posted:

http://www.cbc.ca/radio/asithappens...roker-1.3153754

blah_blah posted:

Yes, 4 is not thousands. The PTT one is fairly substantial but is one-time and can hardly be considered a discount to renting. The First time home buyer's one is a one-time $750. The home buyer's plan frees up capital but has a negative expected return because you're moving money out of your tax-advantaged investment accounts. And the home owner's grant is maybe worth $500/year but isn't really a discount relative to renting either. All of these, combined, are much less significant than the mortgage deduction in the US.

re: capital gains exemptions I'm sure you can look through my post history and find many places where I talk about how ridiculous it is, but I don't expect new Canadian homebuyers to be awash in capital gains from sales of their primary residences going forward.

ocrumsprug posted:

Honestly if anyone said they bought a home based on those breaks I would probably call them a liar, so you aren't wrong about their actual effect. The government moving amortization periods to 40 years, and removing the CMHC limit on insurance are the two pillars that our housing bubble is built on, not tax differences.

Melian Dialogue posted:

Can someone make a good housing industry effort post to explain (in their eyes) what macro tools the government has used to get us to where we are now with housing prices and the bubble? I only know alittle bit about this topic so I'd like to be more educated into the details rather than just "people are dumb who buy lots too much". Someone mentioned earlier in the thread about CMHC's role in this as well.

Also, are we hosed no matter what we do? It seems like with even a slight interest rate increase, unsustainable debt will be even worse. Especially considering we're in a recession, which means future economic stimulation and consumer stimulation, so how do you get that Keynesian money-dump without also yet another increase in unsustainable debt?

Antifreeze Head posted:

I think we all knew that when CAD as above par, we could make some quick cash (couple months) by buying a lot of USD then converting back one things inevitably slipped back to parity, it was just that most of us didn't have the on-hand seven figures of spare cash to make that a worthwhile exercise.

quote:

Ottawa eyes tougher new mortgage rules, larger down payments, to curb Canada’s red hot housing market

government may be ready to take direct aim at Canada’s red-hot housing market, and is actively consulting on a move to increase the minimum down payment required to buy a house, the Financial Post has learned.

Sources say that Ottawa has been studying proposals to increase the minimum down payment from five per cent and said the government is looking at adding restrictions for high-priced housing, which would hit hardest in Canada’s two most expensive cities — Toronto and Vancouver.

“They are definitely looking into this but it doesn’t mean that they will do it,” said one source close to the department, who asked not to be identified. Another source confirmed Ottawa is continuing to look at possibilities for increasing the down payment.

A source with the Department of Finance denied the government is considering any changes to the minimum down payment.

But any inclination to intervene in an already frothy urban housing market can only have intensified after the Bank of Canada announced Wednesday it would lower its benchmark overnight lending rate to 0.5 per cent, leading three major banks to cut consumer rates. Observers have warned that this will only further fuel rising home prices and sales.

Lowering the overnight lending rate is likely to lead in reductions to the prime lending rate used by consumers with floating-rate debt. TD Bank was the first out of the gate Wednesday to lower its prime lending rate, cutting it by 10 basis points to 2.75 per cent. Royal Bank went even lower on Wednesday night, cutting its prime rate to 2.7 per cent. Some financial institutions had already been offering variable-rate loans tied to prime for under two per cent.

Phil Soper, chief executive of Royal LePage Real Estate Services Inc., said the rate cut will probably be good news for the real estate industry and increase house prices in the short-term. “People don’t buy homes based on sticker price, they buy homes based on carrying costs. When carrying costs are lower, they acquire more home,” he said. But, in the long term, he is still worried about an overheated market and the potential for a correction.

Still, the industry has insisted there is no upside to increasing minimum down payments. It has long maintained that would have a disastrous effect on some people who struggle to get together enough money to buy into Canada’s hottest markets.

“The challenge with further restrictions is they impact the first-time home buyer which really isn’t the issue here. They’re not the ones buying detached homes worth more than $1 million,” Soper said.

One scenario being looked at by the government contemplates an increase in the down payment only beyond a certain high-price threshold — a move clearly aimed at Toronto and Vancouver where prices have skewed the national average.

Without explicitly saying so, Ottawa has previously targeted the country’s more expensive markets by tightening up lending rules across the country, and Canada Mortgage and Housing Corp., the Crown corporation that controls a majority of the mortgage default insurance loans, will not back loans for homes worth more than $1 million.

The government has also tightened rules on mortgage amortization lengths. Once as long as 40 years, amortization lengths were lowered in three stages from 35, to 30 to the current 25.

As part of its study, the Finance Department is also considering a maximum 20-year amortization on a mortgage. Longer amortization lengths allow consumers to get a lower monthly payment and therefore qualify for more debt.

Consumers were once able to borrow with zero money down, but current federal rules require a minimum down payment of five per cent in order to get CMHC’s mortgage default insurance, backed by the government. The cost of that insurance can be tacked onto the mortgage itself, which effectively leaves a consumer with a debt position equal to almost 98 per cent of the value of their homes.

The Canadian Real Estate Association said Wednesday the average price of a home sold in June across the country rose 9.6 per cent from a year ago to $453,560. But stripping out the Vancouver and Toronto statistics, the year over year price gains were just 3.1 per cent nationally.

quote:

City halls' red tape and development costs as high as $40,000 per unit are making it more difficult for developers to build affordable housing for families, especially in the city of Vancouver, according to a new report by the Fraser Institute.

Vancouver ranks near the top of Metro municipalities in the amount developers are charged for permits and other building costs, according to New Homes and Red Tape: Residential Land-Use Regulation in B.C.'s Lower Mainland, which was released Thursday by the economic think tank.

"The costs are direct and indirect," said the report's lead author, Kenneth Green, senior director of energy and natural resources. "Direct costs are added directly onto the cost of the new home, from $17,000 in Burnaby to $37,000 in Vancouver," Green said.

The building costs are averages of amounts reported by developers in an optional survey.

Langley Township ($38,000), Richmond ($38,333) and the District of North Vancouver ($40,000) charged the highest fees of all 10 communities included in the survey. Abbotsford ($14,357) had the lowest fees.

"Indirect cost is the time spent waiting for building permits, from 17 months in West Vancouver to five months in Pitt Meadows."

Vancouver had the third-longest approval timelines (15.1 months).

The higher development fees have to be absorbed by the builder or passed on to homebuyers, but where land is at a premium, such as in Vancouver, builders can't absorb the extra costs and have to raise the cost of new units, said Anne McMullin, president and CEO of the Urban Development Institute.

She said that because developers can only charge so much for larger units before homebuyers choose instead to buy a larger detached home or townhouse in another area for the same money, they choose instead to build only one-bedroom or studio apartments.

"It's much too expensive to build two- and three-bedroom condos, so you don't build it because you (as a developer) can't afford the extra expense," she said.

"If it's too expensive, it won't get built," said McMullin.

"All land costs, construction costs, and fees and charges have an impact on the ability to build, and that affects housing options builders can provide," she said.

Vancouver city spokesman Jason Watson said the city can't comment because it hasn't had a chance to analyze the report.

DWELLING FEES

Cost and fee index for B.C.’s Lower Mainland — typical regulatory cost, $ per dwelling unit:

Abbotsford: $14,357

Maple Ridge: $17,500

Burnaby: $17,542

City of North Vancouver: $25,000

Surrey: $25,550

Coquitlam: $32,292

Vancouver: $37,283

Langley Township: $38,000

Richmond: $38,333

District of North Vancouver: $40,000

— Source: Fraser Institute (voluntary developers' survey)

OSI bean dip posted:

Shut the gently caress up, Fraser Institute.

http://www.theprovince.com/Report+blames+builders+fees+city+tape+intensifying+Metro+Vancouver+housing+squeeze/11218746/story.html


Yes. If these were lowered then the savings would be passed on to the consumer!

Also I like the fact that they just used a sample of 45 respondents.

quote:

Canada’s housing boom has no demographic legs to stand on


If you read the headlines, you’d be inclined to believe that Canada’s population is booming. And, as the story goes, it’s this strong population growth that is providing much of the fuel propelling Canadian house prices to new all-time highs virtually every month. “Supply and demand”, as they say.

It’s a great story, but it’s mostly wrong.

In reality, Canada’s working-age population (15-64 year-olds) is growing at the slowest pace on record, a paltry 0.4 per cent or just one third of the long-term average. In 2010, Canada added 240,000 people to the working-age population. Today that number has dwindled to just 90,000. In provinces like Quebec, that number is actually declining.

An outside observer might note that against a backdrop of an unprecedented decline in population growth, the level of residential construction activity should slow sharply. Curiously, that hasn’t happened.

In fact, in the first quarter of this year, residential investment in Canada hit 7.1 per cent of GDP, the highest level since 1989 (which, coincidentally, was the peak of the last housing cycle). Of course back then, population growth was triple what it is currently, so at that time there was at least some demographic justification for a high level of investment in housing.

Fast forward to today. Housing starts in June hit their highest level in 10 months at just under 203,000 on a seasonally adjusted basis. That level of construction means we’re currently building over two new houses for every person we’re adding to the working-age population.

To frame why that’s potentially problematic, consider the chart below, which shows housing starts as a multiple of the number of people added to the working-age population. You’ll note that in the late 1980s, we were building 1.5 new homes for every person added to this group. It’s clear in hindsight that there was significant overbuilding during that time period, particularly in Ontario where house prices subsequently fell 25 per cent between 1989 and 1993 as supply overwhelmed demand. And that drop occurred in spite of the Bank of Canada cutting the overnight rate by 1,000 basis points (10 per cent) over that time frame, which helped put a floor under prices.

The current level of housing construction in Canada is absolutely unprecedented relative to underlying demographic trends. Some of this phenomenon could be due to demand for new houses from foreign investors. Unfortunately regulators and policy makers can’t seem to figure out how to accurately measure this potential source of demand.

This is problematic since, as you might expect, a near record 7.6 per cent of all jobs in Canada are in the construction industry, so there’s a lot riding on understanding the dynamics behind the current boom. It takes on additional importance as housing has been a source of economic growth at a time when other parts of the economy have slowed. That makes the prospects of a reversal in housing activity back to long-term norms all the more worrisome.

Femtosecond posted:

OSI bean dip posted:

Shut the gently caress up, Fraser Institute.

http://www.theprovince.com/Report+blames+builders+fees+city+tape+intensifying+Metro+Vancouver+housing+squeeze/11218746/story.html


Yes. If these were lowered then the savings would be passed on to the consumer!

Also I like the fact that they just used a sample of 45 respondents.

Fraser Institute posted:

"It's much too expensive to build two- and three-bedroom condos, so you don't build it because you (as a developer) can't afford the extra expense," she said.

"If it's too expensive, it won't get built," said McMullin.

Albino Squirrel posted:

I'm sorry, why the hell is it more expensive to build 3-bedroom condos? Your cost should be less per square foot because proportionally less would be devoted to expensive things like kitchens and bathrooms, and more to relatively cheap bedrooms. If anything you'd think it would be more profitable.

Lexicon posted:

You've got it backwards: they can charge more in total for N one bedrooms than M three bedrooms that occupy the same footprint (N > M). "cost" is just realtor/developer rear end in a top hat spin - really it's a revenue argument.